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On the Desirability of an Efficiency Defense in Merger Control

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  • Johan Lagerlöf
  • Paul Heidhues

Abstract

We develop a model in which two firms that have proposed to merge are privately informed about merger-specific efficiencies. This enables the firms to influence the merger control procedure by strategically revealing their information to an antitrust authority. Although the information improves upon the quality of the authority's decision, the influence activities may be detrimental to welfare if information processing/gathering is excessively costly. Whether this is the case depends on the merger control institution and, in particular, whether it involves an efficiency defense. We derive the optimal institution and provide conditions under which an efficiency defense is desirable. We also discuss the implications for antitrust policy and outline a three-step procedure that take the influence activities into consideration. ZUSAMMENFASSUNG - (Wann ist eine Effizienzverteidigung in der Fusionskontrolle wünschenswert?) Eine Effizienzverteidigung in der Fusionskontrolle besagt, dass wettbewerbsbeschränkende Fusionen dann erlaubt werden, wenn hinreichend große Synergieeffekte zu erwarten sind. Mögliche Synergieeffekte einer Fusion sind jedoch hauptsächlich den fusionierenden Unternehmen bekannt. Eine Effizienzverteidigung ermöglicht es den fusionierenden Unternehmen, die Entscheidung der Wettbewerbsbehörde zu beeinflussen, indem sie der Wettbewerbsbehörde ihre Informationen strategisch weitergeben (oder zurückhalten). Die Autoren untersuchen, ob und wann eine Effizienzverteidigung aus gesellschaftlicher Sicht wünschenswert ist. Hierzu entwickeln sie ein Model, in dem Unternehmen, die fusionieren möchten, private Informationen über die Synergieeffekte der Fusion besitzen. Die Unternehmen können die Entscheidung der Wettbewerbsbehörde beeinflussen, indem sie ihre Informationen strategisch an die Wettbewerbsbehörde weiterleiten. Obwohl die Informationen über Synergien die Entscheidung der Wettbewerbsbehörde verbessern, kann die Einflussnahme der Firmen die Wohlfahrt verringern, falls die Firmen zu viel in das Sammeln und Verarbeiten dieser Informationen investieren. Ob dies der Fall ist, hängt von der Ausgestaltung der Fusionskontrolle ab und insbesondere davon, ob die Fusionskontrolle eine Effizienzverteidigung zulässt. In dem theoretischen Model wird die optimale Fusionskontrollinstitution hergeleitet und Bedingungen herausgearbeitet unter denen eine Effizienzverteidigung wünschenswert ist. Die Autoren erörtern die Implikationen des Modells für die Fusionspolitik und entwickeln ein Drei-Stufen-Verfahren für Fusionsentscheidungen, welches die Einflussaktivitäten der Unternehmen berücksichtigt.

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Bibliographic Info

Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 02-08.

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Length: 41 pages
Date of creation: May 2002
Date of revision:
Publication status: Published in the International Journal of Industrial Organization , Vol. 23(9-10), 2005, pp. 803-827.
Handle: RePEc:wzb:wzebiv:fsiv02-08

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Related research

Keywords: Lobbying; Rent Seeking; Asymmetric Information; Disclosure; Efficiency Gains; Antitrust;

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References

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  1. Spector, David, 2002. "Horizontal mergers, entry, and efficiency defences," CEPREMAP Working Papers (Couverture Orange) 0206, CEPREMAP.
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  15. Damien J. Neven & Lars-Hendrik Röller, 2000. "Consumer Surplus vs. Welfare Standard in a Political Economy Model of Merger Control," CIG Working Papers FS IV 00-15, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  16. Froeb, Luke M. & Kobayashi, Bruce H., 2001. "Evidence production in adversarial vs. inquisitorial regimes," Economics Letters, Elsevier, vol. 70(2), pages 267-272, February.
  17. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
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  19. Andrei Medvedev, 2004. "Efficiency Defense and Administrative Fuzziness in Merger Regulation," CERGE-EI Working Papers wp234, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
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